At just a year old, local decarbonisation-focused investment firm GenZero has tripled its team size and pulled off an in-person conference, thanks in part to the backing it gets as a wholly-owned subsidiary of Temasek.
For starters, Temasek committed an initial amount of $5 billion to the subsidiary at its launch in June 2022. GenZero revealed on May 31 that it has committed more than $700 million in investments and has grown its team to more than 30 sustainability professionals since its launch.
Looking back at the past year, GenZero’s CEO Frederick Teo says the firm has strengthened its investment teams and built up expertise in carbon markets, policy and analytics, while growing its corporate functions.
Teo points to director of corporate affairs and communications Michelle Tan, who joined GenZero in October 2022 from DBS Bank, where she was senior vice-president of group communications.
“We now have a communications team. That’s why we were able to organise something like the GenZero Climate Summit,” he says.
GenZero’s inaugural summit was held on June 7 and 8 as a partner event to Temasek’s flagship Ecosperity Week conference at the Sands Expo and Convention Centre. The speakers included David Antonioli, CEO of Verra; Dirk Forrister, CEO of the International Emissions Trading Association; Jacqueline Poh, managing director of the Economic Development Board; Renat Heuberger, CEO of South Pole; and Hannah Jones, CEO of The Earthshot Prize.
Teo tells The Edge Singapore that it is important for GenZero to share information, build awareness and contribute to the global discussion on the evolution of decarbonisation, “precisely because this is nascent”. He says: “If I was investing in something a little more mature, maybe we wouldn’t need to do so much work. But because this is an area that is still new, where standards are still evolving, then I think we need to build up a stronger team with analytical and thought leadership capabilities.”
That said, Teo is acutely aware of the weight that comes with being associated with Temasek. Teo, who was previously managing director of sustainable solutions at Temasek International, emphasises that the two organisations are separate. “GenZero is run as an independent company with our own independent board and management. I propose a particular investment strategy, which my board then approves [before] we go ahead and construct our portfolio,” he says.
That is not to say the two must always work apart. “In this business of climate investing, there is actually a lot of scope for us to collaborate with partners,” says Teo. “Whether it is the funds that we have invested… or our shareholders like Temasek, and other like-minded companies or investors, there is a possibility of thinking how we can collaborate and collectively pull our resources to do more things.”
See also: Are carbon credits credible?
There are other knock-on effects. Prior to this interview, Temasek announced that it had cut the salaries of the investment team and senior management involved in its US$275 million ($370.9 million) investment in the failed cryptocurrency exchange FTX.
With GenZero’s future-minded focus on the “nascent” decarbonisation sector — as Teo puts it — are there concerns about the possibility of similar scandals down the line?
“I can’t speak for Temasek and their decision-making; I don’t have details about the FTX team,” says Teo. “But you’re right; I think in the carbon market space, we have to be somewhat prepared that there will be controversies that will come up from time to time… What we can do is to equip ourselves with the talent, resources and the best information and advice that we can get to reasonably make a decision.”
GenZero found itself in a similar situation earlier this year, when media exposés called into question the methodologies used by Washington-based carbon credit verifier Verra and Swiss carbon finance consultancy South Pole.
Dutch investigative journalism publication Follow The Money claimed South Pole overestimated deforestation figures when closing carbon credit deals with clients like EY. South Pole then decided to suspend the sale of credits from the 2019-2021 verification period.
In February 2022, South Pole announced that Temasek had taken a minority stake “via its carbon solutions platform”. This was later revealed to be GenZero, and a spokesperson said then that the firm will work closely with South Pole and ecosystem partners “to assess the implications of the issues raised”.
Like much of the industry, Teo is taking the unfolding events in his stride. “While this is a nascent industry, it is not right to imagine our space as the wild, wild west with absolutely no rules. The reason why people can criticise methodologies is because methodologies exist; if the rules didn’t exist, how would you be criticising the rules?”
Teo calls the recent episodes a “net positive” for the carbon markets “in the grander scheme of things”. He says: “We do need good, robust, credible carbon markets, and you cannot scale the carbon markets if there is no credibility and there is no trust.”
Carbon credits are not just an offset tool, says Teo. “We see carbon credits as a powerful tool to crowd-in carbon finance to accelerate the development of new solutions.”
In addition, Teo warns against “greenshaming”, which he believes deals both short- and long-term damage. Holding people to account in a constructive manner is a valuable role that the media and other stakeholders play, he says. “But it is important that we don’t go into mindless greenshaming; it’s a very cool cottage industry to go into, because you only throw stones. The question is, really, what are the constructive alternatives? If we don’t do this, then what do we do? We can’t not do anything; that’s not possible.”
Greenshaming could also endanger the future talent pipeline, he adds. “We need well-meaning young people to come in. If we trash this industry in a way that is irresponsible, you put not just people like myself, investors [and] businesses on the sidelines, you could potentially damage the view of this industry for young people who can make a difference for us, and that is a terrible, terrible thing to happen.”
Five- to 10-year horizon
Carbon credits are among GenZero’s three focus areas, which are nature-based solutions, technology-based solutions and carbon ecosystem enablers.
Nature-based solutions are about protecting and restoring natural ecosystems, says Teo. “Trees and natural ecosystems take a lot of carbon from the atmosphere, but they also encompass a lot of additional co-benefits, such as social impact and biodiversity. It’s not just purely about carbon and climate change. They can provide jobs; they can provide protection for local biodiversity, and so on.”
For technology-based solutions, GenZero looks for projects that can “fundamentally decarbonise our industries at scale”, says Teo. “We need to think about how to decarbonise human, economic or industrial activity. So, this results in us looking at solutions that have the potential to scale in a cost-effective manner in the longer run.”
That allows GenZero to invest in carbon capture, utilisation and storage, sustainable aviation fuel (SAF), biofuels, low-carbon materials and the like, says Teo.
On May 31, GenZero joined a US$50 million investment round in CleanJoule, a US-based start-up focused on SAF production.
Finally, carbon ecosystem enablers are important because it is a “fairly efficient platform” to attract carbon finance, says Teo. Capital invested in emerging technologies may not be able to fully offset the cost premium, but it “certainly goes some way” in doing so, he adds. “You are bringing down the price of the product or service faster than they otherwise would naturally. By doing that, you are accelerating change.”
In January, GenZero led a US$15 million funding round into Norway-based climate tech company Chooose, which offers a Software-as-a-Service platform that lets businesses build, manage and report on “customer-centric climate programmes”.
Teo says GenZero considers investments that are likely to turn commercially viable “in the next five to 10 years”. “We are not looking at things like fusion or Generation IV nuclear reactors… If you want companies that are going to make a difference for a 2050 [net-zero] target, you are really looking at companies that, in the 2030s or early 2040s, already have some kind of commercially viable product that can then take a few more years to get broader adoption,” he adds.
Some areas in this sweet spot include fuels and hydrogen, says Teo. “If you’re doing things that already exist, then it is a crowded space. We are looking at where we can deliver the most catalytic impact from the limited amount of capital that we have, and we think that may be a good space for us.”
Photos: Albert Chua/The Edge Singapore